Thursday – Natural Gas Inventory Preview and Oil Inventory Review Plus Lots Of Earnings

182 thoughts on “Thursday – Natural Gas Inventory Preview and Oil Inventory Review Plus Lots Of Earnings”

1. By Lananh Nguyen
   Of DOW JONES NEWSWIRES

   LONDON (Dow Jones)–Crude oil futures rose Thursday in London as the gradual
   erosion of oil supplies spurred buying interest.
   “I think we’re finally seeing the onshore impact of the OPEC cuts,” said Mike
   Wittner, head of global oil market research at Societe Generale in London.
   “That’s becoming clear and that’s quite constructive.”
   At 1239 GMT, the front-month April Brent contract on London’s ICE futures
   exchange was up $0.51 at $44.80 a barrel.
   The front-month April contract on the New York Mercantile Exchange was trading
   $0.84 higher at $43.34 a barrel.
   The ICE’s gasoil contract for March delivery was up $15 at $391.75 a metric
   ton, while Nymex gasoline for March delivery was up 213 points at 118.80 cents
   a gallon.
   The market’s attention zeroed in on supply as it tried to gauge the impact of
   the Organization of Petroleum Exporting Countries’ latest oil production cuts.
   Thursday, the United Arab Emirates became the first OPEC member to announce
   supply allocations for April, with state-owned Abu Dhabi National Oil Co.
   slashing its shipments between 10-15% in accordance with OPEC cuts.
   Slimmer OPEC exports could tighten up global inventories and relieve the heavy
   pressure on oil prices witnessed in recent months.
   “The trend of rising stocks in the U.S. is starting to peak and reverse…we
   believe that the peaks of stock buildings in Europe have also been reached and
   we wouldn’t be surprised if some of the crude oil stocks that have been hidden
   in some emerging economies are also starting to be gradually reduced,” said
   Olivier Jakob, managing director of Petromatrix, a consultancy based in
   Switzerland.
   Despite increasing evidence of OPEC cuts, oil market fundamentals weren’t yet
   balanced, said Tony Machacek, a broker at Bache Commodities in London.
   “Stocks are still reasonably plentiful, particularly for crude (and) we’ve had
   some pretty consistent builds over the last few weeks,” he said. “On the face
   of it, the last couple of days have been quite positive for prices… (but
   there is) skepticism as to whether this is a new trend developing.”
   The crisis in the global economy – and its negative implications for oil
   demand – still loom over the market.
   “Oil prices are now very much in the grip of the overall economic picture,” he
   said.
   Despite Thursday’s gains, prices remained within their recent range and it may
   be too soon to predict a sustained rally, Wittner said.
   Crude was also helped by firmer equity markets, which have recently been a
   strong indicator of sentiment in broader financial markets.
   “All attention will be back on the equity markets and the important macro
   releases at the end of the week, with a good chance for consolidation near
   recent levels,” said Andrey Kryuchenkov, vice president of commodities research
   at VTB Capital in London, noting that the market was anticipating key
   macroeconomic data releases like the U.S. fourth quarter gross domestic product
   Friday, and the ISM surveys in early March.
   “Risk sentiment and demand concerns are prevalent on the energy markets, so
   the upside continues to be limited,” Kryuchenkov said.

   -By Lananh Nguyen, Dow Jones Newswires(Oliver Klaus in Dubai and Yee Kai Pin in Singapore
   contributed to this report.)

   Dow Jones Newswires
   02-26-09 0756ET

2. Thanks Sam, oil up $1+ now. Lots of shorts are going to run to the sidelines between now and OPEC if they think U.S. inventories are peaking.

   Does anyone see a note on FSLR this morning.

   I was not impressed with the well results at all over at GDP, like the company, would like to buy it lower now.

   LINE – I liked other than the quarter and that was one time stuff, guidance on the yield is excellent

   CLR – um, still going through quarterly report (people really should release these after the close and not when I’m bleary eyed). Nothing jumping up and down for me in there.

3. Nicky, when you get in, I’d like to see your thoughts on oil levels here.

4. BDI -10 1950

5. LINE plans to be VERY busy in the Mid-Con region this year. Not alot of drilling, but ALOT of uphole adds and workovers.

6. Credit Market Open — Credit has decided to shrug off the hideous economic news (jobless claims and durable goods orders both way shy of already dismal expectations). One cross-asset class market strategist I talk to actually went out on a limb and called the bottom of the market this morning. I only mention this b/c he believes it, not b/c I do. The Best Martket Strategist In the World (BMSIW) said just yesterday that he has no current “feel” for the near-term direction of the market. He allowed that the market could rally in the near-term. But he thinks that would only give the Credit Bears higher levels from which to short. Don’t know if the Obama Administrations new commitment to fixing the banking system has changed the MBSIW’s mind, but I don’t think so.

   Anyway, for now, the credit market has decided to rally.

   IG 212.5 -3.5bps from yesterday’s close

   HY 73.0 about flat

7. Technical Trader Comments — basically, unless you absolutely, positively, HAVE to trade today… don’t. Too tough to call.

   Same game plan. Much better color pattern to trade. But worse odds, down to 50/50 (dammit) and very low for a Green day and especially a Thursday. That is another warning for sure. Plus the last red week is not helping either. So unless you are making a market, forget trading any size today.

8. Thanks for the color BOP

   TEX – saw your comment on HK well cost as it relates to CHK. You were right, eh? Costlier than CHK initially let on. Re all the workovers, yeah, why try to grow production at these prices. Just maintain the dividend and keep the balance sheet intact for the future…makes a lot of sense. Also, being bigger helps now as not only do you have that big inventory of potential locations to choose from to drill but also of workover candidates…the more the better to cherry pick.

9. GDP down 12%. Those well results are shabby. The takeaway, the Haynesville either isn’t as homogeneous as people have thought or they are in bad spots (several of them) or these wells aren’t easy to complete (which we already know). This is part of why I think the Haynesville, while a great gas find, is not the death of gas prices that many people thought. Not every well is going to be a mid teens or higher IP. People who are spending $9 to $11 mm on a well expecting that and then get a series of 2 to 5 MMcfepd wells will quickly rethink their spending plans, especially in this environment.

10. LINE at $15, up 6.7%. I think they said what people needed to here. Yield still 16.7%.

11. President Obama on air in ten minutes on the new budget outline submitted last night.

12. CLR call in 10 minutes

13. Sounds like the market is digging the President’s chili today.

    CLR starting now

14. Z – I take it the 0.63 distribution for LINE is quarterly…

15. Z – I think what’s dogging FSLR is the notion that Europe is bankrupt & that Germany will be too busy bailing out whole countries to keep its solar subsidies. Whether that stacks up I don’t know but I think that is the perception. Reports lately say that European banks are even worse that US banks and are literally endangering whole countries (larger ones that Iceland).

16. Dman – yes, that’s 2.52 for the year, same ol same ol. The guidance for 2009 includes that and the coverage ratio which measures what they expect to generate in terms of cash flow (over what’s needed to pay interest and maintain production) vs what they pay. They see that number as 1.1x which is strong and in line with recent history for them. Many of their MLP peers have gone sub 1 which means dipping into the til to make distributions or cutting the distribution. These guys are 100% hedged so they have a good grasp on the numbers and it does not matter what gas prices do.

17. Re FSLR – that’s part of the fear, also technical call out to sell it down. They addressed the Germany thing on the call and had recently talked to the Germans about it who basically said its fine for 2009 and 2010. Remember they need jobs too and solar is very much part of keeping people in Germany employed. In fact, many medium and smaller sized banks in Germany have gotten into the solar finance business recently which augments money supply there.

18. GMXR????

19. addendum to 17, I’m not adding any more down here, so that alone should turn it.

20. El – please elaborate. Is the question why is it flat vs the group? My thought would be the GDP poor well results are starting to differentiate the Haynesville players group. Also, I can’t find when they report.

21. Oil up $2.

    NG up 7 cents, inventories in 15 minutes.

22. #17 I could be more confidant in what the Germans are telling FSLR if I had a handle on just how big the black holes are over there. If anyone knows how to measure black holes, chime in 🙂

    But I guess the question boils down to perception vs. reality .. i.e is this fear already priced in?

    I thought this stock was expensive but I just checked and Yahoo has it at 12 x ’09 earnings, which is hardly stratospheric, especially with the growth. I guess it was expensive at $300 on ’08 earnings (i.e. about 100 X). Technically it probably wants to dip below $100 but if the market gets in a groove it will come screaming back in the patented FSLR fashion.

    OTOH, since everyone is watching $100, maybe it won’t get there. There’s a gap to fill.

    Tater?

23. And one last on FSLR…I think if it holds triple digits and is able to get green it will see a very quick $10+ bounce.

    HK has emerged as the big IP name in the Haynesville. GDP was in partnership with CHK on some of the poor wells in the Haynesville. That’s good news for HK that CHK didn’t feel comfortable upping its EUR on the H.S. wells while HK did. They are seeing different results, either do to geology or completion methodology is not certain, I would get more of the former than the later.

24. gmxr cc tomorrow morn at 10am central. I think they release before the open tomorrow.

25. Judging by the intraday action in FSLR, I think it’s the plaything of every hedgie gunslinger… and they do make it dance.

26. z- re GMXR press release is tonight and 10.00 AM conf. call.

27. Dman – pretty much my thoughts too. On the Germany thing, they beat the 4Q handily, and it was not a function of rushing to get orders done by year end. They will produce about double what they did last year. When you look at all the stories out there, very few are going to show year over year EPS growth. Very few in energy are going to show CFPS growth either. XTO is the only big cap E&P name that will do it and I’m not a big fan of them for their recent spending. Anyway, at 9x or 10x on 09 EPS, FSLR would be judged very differently if it were in any other industry. The perception is that people won’t spend on solar because its a slow payback item, times are tight, and governments won’t continue to subsidize it as they are stretched. That simply is not the case and the Germans have publicly said as much and you are seeing utility inroads in the U.S.

    Gotta listen to the CLR deets now

28. Eld – thanks, where did you find that. The EPS tracking agencies don’t seem to have it and I saw no press release.

29. Oil up $2.50, at $45. I have a message into Nicky for a look at the levels.

30. Dman – re your last on FSLR. No doubt its being toyed with.

31. 101 Bcf withdraw. Not bad

32. Street was at 105 BCF, I was up at 115 Bcf. NG is waffling about up 3 cents from the report time.

33. CNBC didn’t bother to cover the gas number, hmph.

34. I called the company and got a secretary who was only to happy to tell me.

    Not sure why they don’t have it posted?

35. ZTRADE:

    $10KP. Sold half the LINE $15 March calls for $0.75, up 80% with the stock up 10% on the earnings release.

36. gmxr – cc info is on their site – but deply buried in the IR section

37. RE GDP. That well was completed off of coil tubing, horizontal run at the bottom of the HS, flowed back just over a week. Word on the street is that they only got 10% of their frac fluid back. Everybody else in the area I know in the workover biz is adamant that the proper way to complete is via tubing conveyed tools, etc.. FWIW.

    This is good for me though as I have been commissioned to build the next generation of a Pickup and Laydown machine to move tubing from pipe rack to workover rig floor faster, cheaper, safer and w/ less mechanical complexity than before. That machine is nearly finished, Patent Pending. So, looks like I may end up as a service co in the HS – although, unlike other patent holders for pickup/laydown machinery, we will build for resale to third parties.

38. Thanks guys. I may just have to play the GMXR. Good continued results with low balance sheet leverage should mean they hold the line on their high growth rate. Could be a set up for a squeeze.

39. Addenda: I was speaking of the 2.6 MMCFD well in Pine Island on the immediate E side of Highway 1 in the “Seven Hills”

40. Thanks Jay, way to hang in there man! These are not easy to complete wells, seeing quite a few mentions of mech difficulties. That gets pretty pricey at this depth/pressure/heat when you’ve already spent $9 to $11 million on the well.

41. z – where is GMXR’S acreage compared to HK and GDP?

42. JR — interesting, entrepreneurial move! The only “pick-up-and-laydown” machine patent I’ve seen was an Italian design, a coupla yrs ago (if I recall correctly). I wish you the best in your endeavors… the industry sure could use a more automated method of moving pipe around. Pls keep us up to date on what you are doing / seeing there. OK?

43. They’re west, in Texas

44. How does PQ figure in this re: geology.
    Does this come down to nature vs. nurture debate

45. PQ is in survival mode. They need higher prices to move the stock up. They don’t have the capital to run after the Haynesville right now but it does underlie some of their Cotton Valley acreage.

46. Adding to 43. That’s been pretty different from an IP and reserves per well standpoint.

47. Market out of steam? Energy stocks looking a little peaked here even with oil holding $45 well and gas appearing to want to stay above $4.

48. Quickie on the Pickup/Laydown technology:

    Basics:

    Can pick up off pipe rack from 2′-8′ off ground

    Can deliver to rig floor from 4′-20′ off ground

    Cradle that accepts tubing can incline at very sharp angle when laying down tubing so that operator can drop block much faster

    One button operation. Suitable for use by worms. If operator takes finger off of button machine stops safely.

    Total of three moving parts, everything totally self contained. Will show website shortly, site visits welcome. First 4 machines are spoken by the company that paid for the development.

    Overall, simple as a rock, simple bio-mechanical model.

    Got interested in the business as current provider of service is getting $185/hr + mobilization + operator + etc
    New machine should payout in approx 60 days at 50% utilization.

    Thanks for the kind words.

    JR

49. Jay, just checked out the link you sent me on the new toy. Please tell me that’s you in the Indiana Jones fedora and jacket!

    LINE call starting now.

50. Er … can I ask what “worms” are doing operating machinery?

51. So you have to ask yourself, how would you feel about your investment in an E&P company if you woke up and found they were going to get paid $8 for gas and $102 for oil. That’s LINE this year.

52. Z – yesterday SU wasn’t buying the move in crude. Today it’s a believer & catching up. Is this a common pattern with SU?

53. Thanks on the LINE info, only thing I own at the present.

    I took a look at FSLR last night and have to take a pass. It is not exhibiting anything technically that I can point to as a trade idea other than to fill the gap. The reality of the name for me is that it is a dot.com. Treat it like that and you will have a better understanding of trading it. It shows all the little twists and bounces and BS that go with manipulative trading. In a nutshell, it is the proverbial playing with fire.
    Not to say it can’t be traded, just be sure to make it your life while you have money in the pot.

54. Dman – it varies of course but lately, yes. Can you blame it with all the recent headfakes, lol. This would be I think a whopping 3 days in a row up for oil.

55. Jay,

    Can you send me a link to your new toy? I have some drilling guys that could be interested. Thanks!!

56. Re LINE, Sure T, thought it was time to put some money on the line there too. Not often do I feel like typing “deal of the decade”

57. LINE CC #1

    The current value of their hedge position (were they to sell out of now) is $1.5 billion or over $9 per share.

58. LINE looks like it will have trouble above at the 200 EMA again. Below, the price bounced off of the gap area that it left behind from the last days of Dec. Currently looks like it may become range bound. Could be time to get creative with covered calls soon if a person were to want to continue to own for the dividend and/or tax reasons.

59. Z Good call on LINE. I’m still in.
    FSLR – …. Patience

60. LINE CC Q&A #1

    Hedges: 13 counterparties, no one holds a big slice

    Bank group: 27 banks

61. Tater – so you think it stalls between here and about $16 from a chart perspective?

62. LINE commodity price thinking:

    Soon back to $5 to $6 on gas due to the rig count reduction and $60 to $70 on oil later this year as OPEC cuts take effect and the economy starts to pick up.

    Interesting to hear from guys taht are 100% hedged for the next 3 years for oil and gas.

63. MD – I won’t have too much patience with the FSLR if it does not hold $100.

    I also flubbed the CLR call, did not pay enough attention to their TFS comments, stock is up 12% despite the quarterly miss.

64. consensus estimate for GMXR is 0.06, way down from previous quarter, which prob is not a surprise.

65. SWN up a buck into earnings…not sure I trust that, hearing 1Q may have some wide differentials out of the Fayetteville Shale. But…it’s awfully beat down. Mulling a buy.

    GMXR just keeps drifting lower. Tater – hate to trouble you but any read on that chart? They just presented their outlook at a conference last week, hard to believe they cut numbers a week later which is probably the fear. These guys are still going to be very low debt at the end of the year, are focused on the Bossier side of the Haynesville Play in Texas, so we are not talking massive wells but they are still going to drill about 45 this year and see nearly 100% production growth. The recent weakness may stem from their JV partner, PVA going to 0 rigs on them in the play. That should be fully in the stock at this point. 4Q production is also out the door so if they miss it will be on the price side of the revenue line, like everyone else seems to be which is easy to forgive. Volumes should be fine.

66. Choices, yep, they pre announced coming in at the low end of the range for production but reiterated a 100% outlook for 2009 growth. They could report an EPS loss still due to price but the bar is set pretty low at this point.

67. If anyone sees a note on FSLR with earnings revisions please send. Thanks.

68. Heads up, I’m going to sell my LINE and buy it back lower, hopefully. Market weakening a bit.

69. Z – do you have a rough hedging situation for GMXR?

70. Dman – I think 57% hedged for 2009, hang one.

71. 59%, average is just a bit north of $7.50 on the gas. The tiny bit of oil they make has floors at $100.

72. ZTRADE:

    Out remaining LINE March 15 calls for $0.80, up 88%. Seems to be running into a little resistance with the market. Very good conference call, will buy it back lower if it drops off here.

73. #61
    Hate to give the big maybe, but maybe. I think we get more clues soon. The area of congestion from the start of the year between $14.50 and $16.50 was actually indicative of a breakout but then price failed all the way back to the low 13’s. Now the bounce. Price of crude may dominate again, but with the dividend reasonably safe it may separate from crude.
    I think it has a very good shot at returning to the 200 EMA and if that does happen, the second time up into it has a better chance of a breakout than the first time (as a general rule).
    Best answer I have for now. Just alluding previously that we may need to have a strategy ready to go should price become skittish at 16. (I actually got fortunate enough to time some purchases with my wife’s IRA, so that is why I’m so into it. I think I care more about screwing up her stuff than I do mine, though the money is actually all ours together).

74. GDP down 15% now. That’s putting the fear today into GMXR and PXP.

75. What is even more interesting about GMXR is the amount of shorts in the market. Of the 11m float 2m short.

76. Eld – GDP and GMXR both heavily shorted.

    GDP 21% of float, GMXR 19% of float short, HK = 6% short

77. GMXR not shortable at fidelty

78. copper futures, FCX, PCU getting a bid, gold futures weak, dollar futures off somewhat after very strong day yesterday.

79. For you TA types, CNBC about to talk about the importance of today’s close for the markets.

80. GMXR

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

    Looks like it could get a short term bounce, not really sure. I do have large reservations about whether the name can sustain any bounce though.

81. Kyle – thanks for checking, thats a pretty good sign for a bounce

82. Tater – thanks very much for that. Re sponsorship concept, as in they have less, I think that can be said for many of the small cap E&Ps out their. What dollars are thinking about energy right now are focused on the bigger names. Fund managers know they have market risk, commodity risk, and don’t want stock specific risk as well.

    I am still torn on doing a trade here today for tomorrow. It is beat down, it is pretty cheap at under 4x 2009 expected CFPS of $5.41. At the beginning of the year they were seen doing almost $7 in CFPS in ’09, but as analysts have trimmed their price decks you can see the impact of the 41% of gas production that’s not hedged. It matters. The stock is off almost 30% as well, which is more than double many of its peers. I think for 100% growth, and very low debt (at year end, next to nothing now) they are too cheap and due a bounce. But its a pretty risky and the calls have fat spreads which probably means I go out a month and near the money. If I can pull it off on the mid.

83. chk just dropped $1; news on closing / downsizing regional office … Z ?

84. The premium for HK over CHK is now back to four dollars. No love for CHK today.

85. Pack – That and what is probably a merit less class action suit. That’s likely an over reaction on the share drop. Maybe an opportunity.

86. The news was out much earlier and the stock was up; what triggered this dumpathon at 12:10 ?

87. chk off 6.3%-do not see anything earth shattering in news item below to cause such weakness

    http://custom.marketwatch.com/custom/tdameritrade-com/html-story.asp?guid={87F684CC-3C3B-461D-B84B-81EE7BD2C5D8}

88. The CHK lawsuit alleges false/misleading statements associated with the July 2008 secondary. Sour grapes filing, probably merit-less.

89. On my newswire, I see a lawsuit last night and then another one this morning. The class action types smell blood and will pile in. I’d expect to see 4 or 5 more firms add on soon. These are generally without merit.

90. Aubrey cannot get any respect or trust.

91. Lunchtime run on the stops ?

92. You see the class action types come out of the woodwork every time prices fall for an extended period of time.

93. Are you saying that the reason for the plunge in CHK was the announcement of a class action law suit?

94. Re: Imports – For Feb. 08 My numbers for that month came in at 244/29= 8.4 BCFPD. If this weeks is 8.2BCFPD that’s only .2 BCFPD. Am I getting wrong info.

95. Saw CNBC comment on how they were surprised the oil and gas stocks were holding up today in the face of the new budget provisions that would seek to boost O&G taxes. The provisions really aren’t that big of a deal in aggregate however counter-intuitive they are if you want to “get off foreign oil”

    1) Obama’s plan, which must still be approved by Congress, would levy an excise tax on Gulf of Mexico oil and gas that would provide the government with $5.3 billion in revenue from 2011 to 2019.

    2) The proposal would also place a fee on nonproducer energy leases on federal lands expected to raise $1.2 billion between next year and 2019, according to a Reuters report.

    Point number 2 is just theft. These will hurt the little guy a lot more than the big guy.

96. MD – I don’t think so. The numbers I get are weekly and it moves around a lot. Can be as much 1.5 Bcfgpd variance from week to week although usually it trends so you are looking at only a few tenths move from one week to the next.

    Elduque – yes.

97. CHK was off $1+, now off 30 cents. Fund managers know this game. There will be more lawsuits almost 100% chance of that. Anybody who did a deal and maybe didn’t cross that i or dot that t will be looked at like a felon.

98. Makes more sense to tax at the pump and leave NG alone.

99. This is a tax or fee or call it what you will on leases bought from the Feds, already bought. If you don’t drill them they expire after the lease term and revert back to the government who then auctions them off again. If you drill them and come up with a producing well you hold them for the life of the well but you pay royalties to the government on the production. This new fee is an addendum to the contract you have with the government. Basically rewriting the terms although you bid on the lease based on the original terms and you aren’t being given back something for that consideration. This is supposed to encourage lease holders to drill what they have and not ask for the right to drill on the OCS. This simply won’t work and is counter productive and I will not apologize for this particular rant.

100. Story on the new budget’s impact on oil and gas, not a lot of details available yet.

     http://www.bloomberg.com/apps/news?pid=20601103&sid=aWqK_HTXcutc&refer=news

101. So just looking at the figures in the article above:

     $31.5 billion in additional taxes, royalties, and fees from the oil and gas industry over 10 years.

     But it also looks at spending.

     DOE budget goes up 5% or $1.3 B
     Interior dept budget goes up 13% or $1.4B

     So $2.7B extra spending per year for $27 billion over the 10 year period.

     So we raise taxes on the private sector and spend almost all of it growing government. Wow.

102. z — That was not a rant. That was a logical analysis. We, The People, have to wake up and start fighting back with Common Sense.

     We are acting like nice little sheep… listening to all the good stuff our shepherd is gonna give us… all with no wool off our back!

     The real world doesn’t work that way.

103. Want to see a number (of jobs) that is guaranteed to grow in coming weeks/months/years?

     These guys are hiring!
     http://tonto.eia.doe.gov/jobs/jobs3.asp?featureclicked=5&

104. z — we all work for the govt… some just more directly than others.

105. Chesapeake Energy color on recent stock weakness:

     CHK has dropped ~$1.00 in the past 20 minutes following a research note disclosing a change in agreement between Plains Exploration (PXP) and CHK, disclosed inside PXP’s 10-K, out premarket. Wachovia says Plains Exploration disclosed that CHK and PXP had amended its agreement on Feb. 20, 2009. The new agreement, favors PXP at CHK’s expense. The firm says the amendment states that between June 15 – June 30, 2010, PXP gets ” . . a one time option, exercisable on or before June 30, 2010, to reduce our obligation to pay 50% of Chesapeake’s drilling and completion costs by $800 mln in exchange for an assignment to Chesapeake, effective December 31, 2010, of 50% of all of our interest in the Haynesville properties.” The firm says while they cannot place a price on the option, they view it as very valuable option for PXP at CHK’s expense.

106. Why would CHK amend an agreement if it wasn’t in their best interest?

107. Wonder why there was no press release on the changed terms… seems rather material.

108. Just read it in the PXP 10K. Odd. I’m sure CHK will have to say something about it in the next day or so. Don’t know why they would just give them an out unless they think rigs are going to be so cheap that they’d rather have the increased working interest (bigger position in the play). Note that there is no money going either direction, this would just reduce the carried interest by $800 mm on future drilling.

109. Today’s analyst calls on HK

     Tristone cuts price target from 18 to 16, maintains underperform

     RBC raises it from 30 to 33, maintain outperform.

110. guess CHK can’t find another partner at terms as attractive as PXP signed up for.

111. For some reason, Tristone has nver been keen on HK.

112. Not sure what PXP’s deal is, their press release was pretty glowy about the Haynesville this morning and cited a strong start in 2009.

113. z — PXP… maybe they are worried about liquidity in 2010… looking to build in a little financial flexibility with respect to spending.

114. Tempted to play GMXR, SWN, and SD small. Bad news seemingly out there now on pricing and differentials. All about guidance now. GMXR won’t have a problem on the top line at least from volumes, SWN might be a little light. SD not too worried about but guidance could be light (its just so beat down but so are its CFPS estimates).

     BOP – could be, if someone gave me a free option why not take it.

115. Notes from the PXP conf call —

     o monetized $1.125B of hedges in 4Q09
     o 71% and 92% of 2009 oil and gas production hedged
     o lowered production guidance on Flatrock discovery
     o mngt believes mrkt being too optimistic on gas prices rebounding
     o mngt doesn’t think a price recovery until late 2010 or early 2011
     o will be FOCF negative in 2009, ($300mm)
     o reduced production guidance to 78k from 82k boe/d on redux in spending

     Sounds like the PXP boys are pulling in their horns and hunkering down until late 2010 or early 2011. Negotiating the put with CHK would be consistant with that thinking.

116. LINE sold Thx Z

117. Glad it worked. I’m likely to buy the units and hold for my kiddos college fund, hard to beat that locked in yield.

118. I’m going to play SWN, just crossing things off my list. I think they may miss the quarter on the bottom line. I think they will have a pile of gas behind pipe to talk about for the 1Q so very strong guidance. They may have a Haynesville well to talk about. They should be able to talk about better well performance in the Fayetteville.

119. That went off faster than I thought.

     ZTRADE: Added SWN $30 March Calls (SWNDF) for $2.40 (on the mid) with the stock up $0.90 on the day.

120. z — how has the basis differential held up for SWN in the Fayetteville?

121. Z, et al:

     Re: Pickup and Laydown Machine

     Answers:

     1) Yes, that’s me in the Indiana Jones garb.

     2) Some details are being kept out of public view for another 2 weeks or so. Link requests to: jayreynolds@wb4me.com

     3) Name of machine will probably be “IronGlide”, delivery/laydown cycle time goal is 5 seconds.

     4) A “WORM” is oilfield slang for an inexperienced hand.

122. Looks like natural gas is going to close up today following that number so one bullet dodged. Its very warm outside. I would not expect gas to be resilient in the face of next week’s number. This may or may not pressure what has become a very highly hedged and already beat down set of gassy E&P companies. My sense is that people are attempting to look through the shoulder season weakness.

123. BOP – as far as I know, not that well going by what others have said. I think that’s going to be behind us shortly so that may be what’s dragged the stock for a time. Also why I think they may miss the quarter. Lots of guys have missed on price this quarter, not being viewed as a big deal.

124. z- You can post the image I just sent you, answer to q. 120

125. Jay – ya know I’ve always wanted to be a worm for a day.

126. z — thanks. not trying to pick at the idea… just wondering if it will “surprise” some people. But, if the diffence is on the downhill side of the problem, could be an oppy to add to the name. just thinking… thx.

127. Saw it, basically $1.60 discount off henry hub of late, would see that falling to less than a buck as Boardwalk gas reaches the end of the line instead of being taken off mid way.

128. 3 days in a row with crude trading on its highs at the close

129. Reef – just sent me Floyd sees the discount going to $0 discount to H Hub in an email just viewed. I didn’t hear that but I miss things from time to time, that’s a better boost than I would have thought. Floyd would know better than I as he is one of the few guys outside of Appalachia who get almost Nymex and sometimes better pricing on most of their gas.

130. Good afternoon all.

     Oil – 10dma at 40.44 and 20 dma at 42.63 so this move looks constructive.

     Resistance at 48 and then 50.

     It looks to me as though we are in wave ii up of 5 down. If this is the case we aren’t likely to take out $50.

     Come a long way quickly and it feels like a bit of short covering to me…..

131. Elduque – yep, one more day like today and it would breach the upper bolly band, hasn’t done that since May of last year.

132. EIA Dec. Monthly
     NG Dry Prod w/supp.fuel Up MOM to 58.17 BCF from 57.70
     Imports up to 9.3 vs. 7.6

     Consumption 76.84BCFPD DN .5% Drill down
     Res and Comm. up (HDD up)approx. 6%
     Ind DN 12% and electric DN 5%

     Balancing -215 BCF or 7 bCFPD

133. Consumption figures are YOY

134. I know that I’m just a hillbilly and all, but would the whole world collapse if we just poopcanned the whole DOE? I know that they create all those cute reports, but maybe if we didn’t have them doing it, maybe you could enter the market and be able to sell your own ZMAN reports because you wouldn’t have to compete with the government. Maybe there’s a whole cottage industry just waiting to employ itself, except the government already affords itself a monopoly in that sector? (I wonder if the government gives itself a monopoly in other sectors? No, that’s just not possible, the government wouldn’t attempt to make itself the only player in any industry. The banks are not an industry, they’re a …a….um…). Wouldn’t that just be a microcosm of how jobs would be created if the government would just get out of the way?
     Silly me. What the hell would that solve? We all know that bigger government is the ONLY answer. Any other idea would be anarchy. I’m such an idiot.

135. md – I saw it, will have the supply side slide show for the morning

     tater – I like the way you think. Make sure that cave is cozy its going to be a long winter.

136. California Home Sales Double as Prices Plummet 41% (Update2)
     2009-02-26 19:24:57.383 GMT

     By Daniel Taub
     Feb. 26 (Bloomberg) — California home sales doubled in January from a year earlier as buyers took advantage of an almost 41 percent decline in the median price of an existing home, the California Association of Realtors said.
     The number of existing, single-family detached homes sold jumped to 624,940 on an annualized basis, up from 311,160 a year earlier, the Los Angeles-based group said in a statement today.
     The median price dropped to $254,350 from $427,200.
     “With favorable home prices and historically low mortgage rates, affordability in the California housing market is now at its highest since the start of the decade,” James Liptak, president of the Realtors group, said in the statement.
     The drop in prices and rise in sales come amid an increase in foreclosure sales in the most populous U.S. state. More than half of all existing-home sales in both Southern California and the San Francisco Bay Area were foreclosure sales in January, San Diego-based research company MDA DataQuick said last week.
     January was the first month since October 2005 that the seasonally adjusted, annualized sales rate passed 600,000 in the state, the California Association of Realtors said today. The time needed to deplete the supply of homes on the market at the current sales pace dropped to 6.7 months from 16.6 months a year earlier.
     The median number of days it took to sell a single-family home in California was 49.9 last month, down from 70.8 a year ago, the association said.
     California luxury home prices fell in the fourth quarter, according to a survey released this week by First Republic Bank, a unit of Merrill Lynch & Co. The average price of a luxury home dropped 3.7 percent in Los Angeles, 8.3 percent in San Diego, and
     3.1 percent in San Francisco.
     First Republic defines luxury homes as those costing more than $1 million and typically having 3,000 to 6,000 square feet (279 to 557 square meters) of space, three to six bedrooms, and three to six bathrooms.

137. Gas production was flat sequentially. Looked toppish in Texas, Wyoming, New Mexico and perhaps most importantly in the “other states” category which has been a freight train.

138. Tater- You do have a point. When there,s a balancing number throws the whole calculation out the window.

139. I’m done. I’m not a victim. I decide what I do, and how I’ll do it, even if obstacles are regularly thrown in the way. What fun would it be if there weren’t any bumps in the road?

140. Hmmm, this guy is taking no prisoners!

     By Siobhan Hughes and Ian Talley
     Of DOW JONES NEWSWIRES

     WASHINGTON (Dow Jones)–The Obama administration Thursday proposed raising at
     least $31.5 billion over 10 years from oil and gas companies, reflecting a
     repeal of tax breaks for domestic production and new charges on oil and gas
     production in the Gulf of Mexico.
     The plans, outlined as part of a fiscal 2010 budget proposal, revive
     long-standing Democratic efforts to turn to the oil and gas industry as a
     source of funding for other priorities. Among other things, the Obama budget
     plan calls for about $13 billion over 10 years in new charges on oil and gas
     companies from the repeal of a tax deduction for domestic production.
     “It’s a concerning area, of course, because as you put more royalty and tax
     burdens on the industry, particularly a cyclical industry, you just have to be
     cognizant of the potential impact it has on investments,” said Marvin Odum, the
     president of Royal Dutch Shell’s (RDSA) U.S. operations, after meetings with
     various lawmakers about energy policy. “That’s not something you can put real
     definition to, but I think it’s a concern.”
     Oil companies have been fighting to maintain the tax treatment, which they say
     keeps jobs in the U.S. by encouraging domestic production. Congress scaled back
     the tax deduction last year to help pay for an extension of tax breaks for the
     solar and wind industries, but stopped short of eliminating it entirely.
     The Obama administration also proposed a new excise tax on oil and gas
     production in the Gulf of Mexico, saying it would raise about $5 billion over
     the next 10 years. The White House said that the new tax, along with plans to
     charge user fees to oil companies for processing oil and gas drilling permits
     on federal lands, would “ensure that federal taxpayers receive their fair
     share” and “close loopholes that have given oil companies excessive royalty
     relief.” The tax “will begin in 2011, after the economy has had time to
     recover,” the White House said.
     Democrats have been battling oil firms to get royalty payments from Gulf of
     Mexico leases signed in the late 1990s, years when the government apparently
     accidentally left price triggers out of contracts. Government auditors say that
     the omission could ultimately short change taxpayer coffers by billions of
     dollars.
     Six companies – including BP PLC (BP), Royal Dutch Shell (RDSA),
     ConocoPhillips (COP) and Marathon Oil Corp. (MRO) – originally agreed to pay
     royalties on the leases for production from October 2006, but not on past
     output. But that agreement wasn’t finalized, and negotiations stalled after
     lawmakers pressed for payment on past output and after a court ruling in favor
     of the oil industry. The firms only represented a fraction of the total lease
     owners.
     Around 40 companies representing 80% of the production haven’t agreed to
     re-negotiate the leases, including Exxon Mobil Corp. (XOM), Total SA (TOT),
     Chevron Corp. (CVX) and Anadarko Petroleum Corp. (APC), according to Interior
     Department data.
     Interior Secretary Ken Salazar and key Congressional Democrats have promised
     to reform the structure of fees and royalties on public lands, and a senior
     Office of Management and Budget official said the new oil industry taxes would
     help to “re-balance the tax system.”
     “This budget begins that process, that conversation on finding ways to
     rebalance the tax system over so that we can get at the $1.3 trillion deficit
     that we inherited,” the official said.
     -By Siobhan Hughes, Dow Jones Newswires
     Dow Jones Newswires
     02-26-09 1448ET

141. Wow, what poured cold water on the market?

142. not sure… think it might be this…

     http://www2.fdic.gov/qbp/2008dec/qbp.pdf

     At year-end, 252 insured institutions with combined assets of $159 bln were on the FDIC’s “Problem List.” These totals are up from 171 institutions with $116 bln in assets at the end of the third quarter, and 76 institutions with $22 bln in assets at the end of 2007… Expenses associated with rising loan losses and declining asset values overwhelmed revenues in the fourth quarter of 2008, producing a net loss of $26.2 bln at insured commercial banks and savings institutions. This is the first time since the fourth quarter of 1990 that the industry has posted an aggregate net loss for a quarter. High expenses for loan-loss provisions, sizable losses in trading accounts, and large writedowns of goodwill and other assets all contributed to the industry’s net loss. A few very large losses were reported during the quarter—four institutions accounted for half of the total industry loss—but earnings problems were widespread. Almost one out of every three institutions (32%) reported a net loss in the fourth quarter. Only 36 percent of institutions reported year-over-year increases in quarterly earnings, and only 34 percent reported higher quarterly ROAs…

143. Z,

     FDIC report I believe.

144. Thanks guys, had my head in the gas monthly.

145. SWN gave up the day’s gains, won’t matter if guidance is good.

     Beerthirty

146. Z, I listened to the GDP CC this morning and I was surprised by the Haynesville comments. I was equally surprised by the PXP CHK redo where seems to give PXP an out if it wants it. Do you think these are one off items or is the HS not nearly as homogenious some think? Also, great call on today’s storage numbers. I think we are going to have a few more 100 B withdrawals since it is goiing to cold here in Chicago for the next 2 weeks. Bastardi says a cold March is in store. Any predictions on next week’s storage number? Thanks Bill

147. HK news? after hours down to
     17.35bid 17.50ask

148. Sport – back in 10 minutes

149. John – I don’t think so, same goes for several energy names post close including SWN which has not reported yet. Something odd going on at NYSE.

150. Z on HK 4000 offerred on arca 17.16

151. Bill – Either the H.S. has some cold spots or they are having a lot of completion problems. Looks like both. All other shales have cores or fairways and non core positions so there will certainly be some variability. I was just surprised to see the lower results in that part of Louisiana (Caddo) so maybe they were just unlucky.

     Next weeks storage number, lower maybe 50 to 60 but that’s real loose and based on a forecast which I’m thinking may have been a little too chilly. Its 70 something here today.

152. Just bought some at 17.25

153. hearing overnight block dea Hk – 22 M shares pricing 17.5 -18 -company stock

154. something weird going on with HK… wonder if a fund is just Big-Footing it out of energy… in the sloppiest fashion I have ever seen.

155. Nifkin – spot secondary?

156. think so

157. From Yahoo msg board…fwiw
     Petrohawk-HK 22M Share Secondary To Price In The Morning

     Petrohawk is pricing 22M shares with a price range of $17.50-$18.00. Note shares are trading at $17.10, down $1.44.

158. How lame.

159. Truly lame!

160. Pricing it pretty far in the hole, Floyd hasn’t bought his back so I guess he doesn’t care. Size makes sense, just seems they could have waited on the price. Really gutting the shareholder here.

161. HK — that’s gonna leave a mark. Still, can’t say it’s unexpected… just thought they would wait ’til the stock was closer to $22.50 before pulling the 2ndary trigger.

     i’m with z… lame-o

162. z — gonna guess there was one or two reverse inquiries to HK… there are a number of HFs that want to own this name. Probably have a keystone buyer or two, so threw it open to the public.

163. and they are raising salaries! hitting the tape now

164. Right. So let them own it higher. My kingdom for a company that acts like it covets its shares. That would be CRK.

     Can you find out who’s running the book? That will make a big difference in digging out of the hole in the morning.

165. The Tristone analyst is doing the Happy Dance.

166. Barclays (Leh) and Credit Suisse

167. 22mm + 3.3mm shoe

168. 163 doesn’t bother me, they’re not out of line and they’ve done a good job growing reserves.

     Thanks BOP. Is Driscoll from Lehman now at Barclays. Could have used someone a little less droll on gas and the E&P secotor to pitch it.

169. Jeff Robertson at Barclays… DK him. you?

170. Any mention of a conf call BOP?

171. Not a big axe name. Who’s the guy at CS?

172. john11 — FWIW, i think your buy will turn out just fine. As i said, a lot of people want to own this stock.

173. CS = Anish Patel… remember him from the cc. he has the stock as a “neutral,” BTW.

     But, CS = king of High Yield… so, rewarding the bond desk through the equity desk.

174. BOP – I think its fine by mid next week relative to today’s closing level.

175. BOP – you’re a cynic with good reason, lol. Like I said, would have been nice to have someone on the bull side running the book. Must have owed CS.

176. no mention of any conf call… but i’m sure CS could arrange one for you… if you buy a coupla MM shares!

177. “stock” is easy to place, relative to being a B3 rated debt issuance. you BET they owed CS.

178. On the flip side, it will make the ratings agencies very happy.

     Of course WLL did their secondary at $29 at the end of January and its under $24 now.

     I will probably buy it on weakness and then get out on a rebound. I can tell you that the company’s much alluded to on the call April operations update better be stellar.

179. (re #77, my syntax is getting all wobbly… but, you get my meaning, i trust)

180. here’s the thing… i don’t think it will trade below the placement price. i think john11 snagged some smart shares.

     HK is a HF fav now… and this fits the short gold / long oil trade. Well, kinda. Point is, strike while the iron’s hot. HF’s currently in the spotlight and they are dancing as fast as they can.

     but, we shall see.

181. make that “HK’s currently in the spotlight…”

     like i said, going wobbly….

182. Hear ya, going for a walk.

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